U.S. existing home sales down again

But lower mortgage rates seen boosting the economy

By

GregoryRobb

WASHINGTON (CBS.MW) -- Existing home sales fell for the second month in a row as higher mortgage rates started to bite, but sales could be stronger for the remainder of the year because rates recently have pulled back, the National Association of Realtors said Friday.

Existing home sales fell 2.7 percent in August to 6.54 million units on a seasonally adjusted annual basis. Read full release.

The fall in August sales was sharper than expected. Economists had forecast that sales would fall 1.3 percent to 6.63 million units. See Economic Calendar

"This is not the start of a major housing market slowdown, which

will only happen when rates rise substantially and stay up. Instead, it is a correction from unsustainable levels," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

In July, sales were down 2.9 percent to 6.72 million units from the record sales level of 6.92 million units in June.

David Lereah, NAR chief economist, said higher mortgage rates in June and July were the key factor in the decline in August existing home sales.

But mortgage rates have fallen since mid-August, which should bolster sales for the remainder of the year, he said. Listen to Lereah interview.

The national average commitment rate for a 30-year fixed rate mortgage was 5.87 percent in August, down from 6.06 in July.

"It is still a great real estate market," said Thomas Kunz, president and chief executive of real estate firm Century 21, a unit of Cendant Corp
JCD

On a year-on-year basis, existing home sales were up 2.3 percent.

The decline in mortgage rates "is good and positive for us. It looks like it will continue to be a strong real estate market for this year," Kunz said.

Existing home sales are recorded at the close, so they represent contracts signed in June and July.

The median national sales price was $190,100 in August, up 7.3 percent from the previous year. Inventories of unsold homes fell a slight 0.4 percent to 2.48 million, a 4.6-month supply.

Kunz said that his recent visits across the country indicate that there is some more inventory in the housing market, giving consumers more choice in homes, and sales are "still moving."

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